The real estate tax system must be equal for both companies and households, the Minister of Economics Jānis Vitenbergs (KPV LV) said in an interview with the TV3 program “900 seconds”, commenting on the planned changes in the system.
“This new system should not make anyone better or worse. It must be equal for both companies and households, ”said Vitenbergs.
Among other things, he pointed out that under the proposed regulatory changes, companies would have to pay real estate tax rebates to households. “It is positive if some groups of people have discounts, but as a minister of economics, I am more concerned about the section that could apply to entrepreneurs, to the business environment. The discounts would have to be paid at an increased rate directly to entrepreneurs, “said the Minister.
Vitenbergs explained that by increasing real estate payments, Latvian companies would lose competitiveness in foreign markets, as well as Latvia would not be able to attract investments.
At the same time, the Minister also welcomed the intention to bring the cadastral values of real estate closer to the market value. “It’s not bad in itself that we see the real value of real estate, but there has to be a clear system for calculating real estate tax,” said Wittenberg.
It has already been reported that on July 29, the Ministry of Justice sent the Ministry of Finance, as well as other institutions involved in the harmonization, the updated proposals for the real estate tax reform. The Ministry of Justice calls for the introduction of a non-taxable minimum of 100,000 euros per declared person, as well as a reduction of the tax on residential land five times – from 1.5% to 0.3%.
The revised proposals provide for a non-taxable minimum of EUR 100 000 per person declared, with a reduction coefficient of 0.2 to be applied to the balance of the value, if any. For example, if the cadastral value of the dwelling is 80,000 euros and one person has declared it, the housing tax should not be paid. If, for example, the value of the dwelling is 300,000 euros and two persons have declared it, then the tax would be calculated from 20,000 euros. This reduction coefficient would only apply to housing with a value of up to € 500,000.
According to the calculations of the Ministry of Justice, implementing these changes, the total revenue of local governments from the real estate tax in 2022 would be at least 232 million euros, while in 2018 local governments actually collected 207 million euros.
In mid-July, the State Land Service submitted for public consultation the cadastral values designed for 2022, which have been recalculated according to the market value of real estate in accordance with the task given by the government. For these cadastral values to come into force in 2022, they must be approved by the Cabinet of Ministers. The Minister of Justice Jānis Bordāns (JKP) has previously stated that he will not submit these projects to the government for approval until there are guarantees that the tax-free minimum for primary housing and reduced tax rates for businesses will be introduced.
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